Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA), Elizabeth Arden, Inc. (RDEN): This Stock Looks Ugly for Now, but can Beautify Your Portfolio in the Long Run

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The company has an experienced real estate team, which has led its aggressive expansion efficiently so far. This store expansion has been well-complemented by Ulta’s brand and product expansion. The company added 20 new brands to its already swelling portfolio last year, and this puts it in an advantageous position against peers such as Elizabeth Arden, Inc. (NASDAQ:RDEN).

Elizabeth Arden, Inc. (NASDAQ:RDEN), which is primarily known for celebrity fragrances and Prevage anti-aging creams, has been witnessing tough times due to its reliance on departmental stores. Elizabeth Arden, Inc. (NASDAQ:RDEN) is in the midst of a brand overhaul, and has been acquiring licenses for more celebrity fragrances. However, it falls way behind Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA)’s huge assortment of 500 brands and its growth strategy doesn’t evoke the same amount of precision and panache as Ulta does.

In addition, Ulta’s boutiques have been doing quite well. It is looking to expand them further this year, which puts it in direct competition with a department store such as Macy’s, Inc. (NYSE:M). Macy’s also offers beauty products in its department stores apart from offering salon services to customers. It has around 840 stores, enabling it to have a farther reach than that of Ulta. But, Ulta is focused on expanding aggressively, and it won’t be surprising if it manages to wipe out the gap in the next three years.

Macy’s is currently engaged in a squabble with J.C. Penney Company, Inc. (NYSE:JCP) and Martha Stewart, in an effort to guard its market share. Thus, it would be the correct time for Ulta to move in on Macy’s turf aggressively and it’s doing the same — opening boutiques by taking a small hit on the bottom line.

Apart from these moves, Ulta is focused on expanding its loyalty program member base further from the present strength of 11 million. Also, the company’s e-commerce business has been doing well and a site redesign is on the cards this year in order to make the experience even better. Moreover, Ulta Salon, Cosmetics & Fragrance, Inc. (NASDAQ:ULTA) is looking to give e-commerce a concerted push this year by improving its fulfillment capabilities through its distribution centers.

The takeaway

While the absence of a full-time CEO is undoubtedly an area of concern, the company’s senior management does seem to possess the experience to guide Ulta for the time being. Ulta’s business is still a growing one, and the company is doing its best to get better in the future. The stock has had a tough time of late, but the long-term story still looks good.

The article This Stock Looks Ugly for Now, but can Beautify Your Portfolio in the Long Run originally appeared on Fool.com.

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